HELP! JOURNAL ENTRY CONFUSION!!

System
System Posts: 100,534 🤖 Admin 🤖
edited 10:24AM in AAT student discussion
Can anyone help? I'm feeling confused by journals! I did my unit 3 simulation yesterday and was completely confused by one of the journal entries we were asked to make: "An invoice for £6500 for decorating offices has been posted to fixed assets in error. This is a revenue item and should be posted to office expenses". This was amongst the journal entries required in order to make the trial balance balance by using a suspense account and clearing this out by journal entries. Do you think it's a trick question and it's got nothing to do with suspense accounts, or am I missing something?

Hope someone might be able to throw some light on this one as I'm baffled!

Comments

  • System
    System Posts: 100,534 🤖 Admin 🤖
    Re:HELP! JOURNAL ENTRY CONFUSION!!

    By process of elimination:

    1st Journal Entry:

    Debit Fixed Assets
    Credit Suspense

    2nd Journal Entry

    Credit Fixed Assets
    Debit Office Expenses

    3rd Journal Entry

    Debit Suspense
    Credit creditors [if the invoice not paid] or bank if paid by cash

    That's the only way (from your post) that I can think the suspense account would be cleared.

    Regards
    Steve



  • System
    System Posts: 100,534 🤖 Admin 🤖
    Re:HELP! JOURNAL ENTRY CONFUSION!!

    Although I am not doing unit 3 yet and only entered myself for the exam sittings,

    I can only gather it is an error of principle which does not affect the suspense account.

    Therefore assuming that the invoice was cr to the creditors account and dr to the fixed assets account (Premises).

    We can say to correct this we dr the Office expenses and cr the fixed assets account.
  • System
    System Posts: 100,534 🤖 Admin 🤖
    Re:HELP! JOURNAL ENTRY CONFUSION!!

    Roy's conclusion is also correct. Unless the invoice was originally credited to the suspense account then it cannot form part of the journals that would clear the suspense account balance.

    Regards
    Steve
  • System
    System Posts: 100,534 🤖 Admin 🤖
    Re:HELP! JOURNAL ENTRY CONFUSION!!

    I suspect that this is one of those things the AAT throws in to see if you're awake. I wouldn't exactly call it a 'trick question', it's just designed to show that you know there are types of error that don't affect the TB

    Chris
  • System
    System Posts: 100,534 🤖 Admin 🤖
    Re:HELP! JOURNAL ENTRY CONFUSION!!

    Hi,

    This Journal had nothing to do with the Suspense acount. The entries should be
    DR Premise Costs/office costs (cant remember the name of the account)
    CR Fixed Assets.

    The other two Journals were to do with the Suspense
    Account.

    Hope this helps
  • System
    System Posts: 100,534 🤖 Admin 🤖
    Re:HELP! JOURNAL ENTRY CONFUSION!!

    Thanks to you all for all your help! I had a feeling the journal was nothing to do with suspense account, but wasn't sure. That makes sense now.

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